‘Zim still needs to improve the business environment’ 

‘Zim still needs to improve the business environment’ 

Source: ‘Zim still needs to improve the business environment’ – The Zimbabwe Independent March 9, 2018

Zimbabwe Independent senior political reporter Wongai Zhangazha (WZ) interviewed German ambassador Thorsten Hutter (TH, pictured) on Berlin’s commitment to normalising strained relations with Harare as part of the re-engagement process once Zimbabwe fosters investor confidence, fights corruption, holds credible elections and upholds the rule of law, among a range of issues. Find below excerpts of the interview:

WZ: You have been in Zimbabwe for slightly more than a year. How has been your experience so far?

TH: My time in Zimbabwe has been very interesting, in particular the changes that took place at the end of last year. My impression so far is that Zimbabwe is a wonderful country with wonderful people who have an amazing spirit and who are extremely well trained.

WZ: How would you describe bilateral relations between Germany and Zimbabwe?

TH: Germany has been one of the more important partners of Zimbabwe since independence. There were a number of German companies that came here in the 1980s and 1990s. We also had German farmers come here to invest in agriculture and the inter-government relations were really close. This can also be seen by the fact that our development cooperation was very strong in terms of technical cooperation as well as financial cooperation. That cooperation was negatively affected by the events that took place around the fast-track land reform. This affected the German farmers who had come here after independence and had purchased property. So there has been lessening of the intensity of the relations.

In 2002, we had to stop official development cooperation but we have continued development cooperation with development partners that are here in Zimbabwe. One of the latest support activities that my government has decided on was to increase our participation in the education development fund which is administered by Unicef. We have now a total German contribution of US$61 million to the education development fund to help the education system in Zimbabwe.

Of course, development cooperation is only one aspect of bilateral cooperation. We still have some companies here and we try to assist and support them. The biggest company that is still here is DHL and then we have some German companies that work with local partners and distributors, for instance Mercedes-Benz, Volkswagen and BMW.

We also have cultural relations.

WZ: How are the trade relations between Zimbabwe and Germany? What is the balance of trade and which Zimbabwean products are Germans interested in?

TH: With the coming in of the new president it has become obvious that the most important issue is to re-energise the economy, the private sector. The trade relations between Zimbabwe and Germany are of course governed by the European Union (EU)-Zimbabwe economic partnership agreement that is in effect. Germany does not have its own trade policy; trade policy is the responsibility of the EU. This economic partnership agreement opens up trade opportunities between German and Zimbabwean companies.

Our trade volume as a whole is a little below US$100 million and that’s roughly about 20% of overall EU trade with Zimbabwe.

We have a trade deficit which means that Zimbabwean exports to Germany are larger than German exports to Zimbabwe. Most products that German companies import have to do with agriculture (tobacco), horticulture, textiles and minerals. German exports to Zimbabwe are mostly machinery and cars. The German direct investment in Zimbabwe in 2015 was €32 million and that has gone down since then.

WZ: The Zimbabwean government has announced that the Indigenisation Act will now apply to platinum and diamonds only. Has this eased German investors’ fears and if not, what would the investors prefer?

TH: First of all we appreciate the announcement by the president to scrap the Indigenisation Act and to limit that to platinum and diamond. The point I want to make is that Zimbabwe needs a lot of investment in infrastructure, the mineral sector, in agriculture, in industry and also in tourism. It needs more to attract investors than ending indigenisation.

You have to look at global trade and global investment from the point of view of a German company. There are many opportunities in Asia, Africa and Latin America and even though we have some very large multinational corporations they cannot invest in a 100 countries. They have to take strategic investment decisions, and at the moment German investment is concentrated in a few countries in Africa: South Africa, Nigeria, Kenya, to some extent Tanzania and Namibia.

So Zimbabwe is in a competitive situation with its neighbouring countries and beyond and, yes, Zimbabwe has a number of minerals that are attractive, but as far as I know Zimbabwe does not have a monopoly on any of those. These minerals can also be mined elsewhere. Zimbabwe has to reach out to investors and has to make a convincing case why those companies should invest here. But there are several other aspects that are important in this context.

German companies are usually not the first ones to rush and take hasty investment decisions. They will have a look, they want to talk, they want to listen, they want to hear arguments why it would be good to come to Zimbabwe and they will compare that with their experience in other countries and then they will take a decision. Maybe that’s a German habit. We are very serious about facts, we want to know things and, given the past, fact is that Zimbabwe did not treat foreign investors well, including the German ones.

Of course, the government of President Emmerson Mnangagwa has not been in office that long, the announcements are there to make Zimbabwe business friendly and that now has to be put into practice.

WZ: What else have German investors raised apart from the legal aspects?

TH: Liquidity and foreign currency. This was very clear during the visit of our business mission which was organised by the German African Business Association which represents more than 500 German companies. The legal framework is one thing under which German companies will operate in Zimbabwe. Then they need to know whether they are able to bring in money and they want assurances that if they bring in money they can use that money as they wish, and they want to be assured that the currency is transferable.

If you set up a company in Zimbabwe you have to capitalise it, for that you have to bring in money. But the company might need to buy machinery and products outside of Zimbabwe. That’s something that all companies are very adamant about. Once they have money in their account they want to be able to use it according to their business needs. This is a very important issue for the Zimbabwe government to address.

WZ: Since the changes were announced, has there been an increase in interest and investment enquiries by German investors?

TH: I have to clarify something. We are talking about German companies and not necessarily German investors. German companies would also want to trade more with Zimbabwe, which also includes that they want to sell machinery or software or other products which they believe Zimbabwe needs. That interest has grown absolutely.

I was invited by the German Chamber of Commerce and Industry for Southern Africa which has its headquarters in Johannesburg for a meeting with the German business community. That was three weeks ago and there was a very big turnout. You could feel that people are interested and are looking at opportunities to do business here. Then we had the business delegation which was organised by the German African Business Association which was here just now. We had a number of well-known names like Siemens, Bosch, Gauff Enterprises (a well-known highly respected engineering company), among other big companies. There was an increase in interest because people in Germany are under the impression that now things are moving in Zimbabwe.

There is a feeling among companies, however, that Zimbabwe has to undertake a lot of efforts to turn the economy around.

WZ: For many years, the Germany investors and the government have expressed their unhappiness because of Zimbabwe’s violation of the Bilateral Investment Promotion and Protection Agreement (Bippa). Has this issue been solved?

TH: We do still have cases where we had to help German investors. We sincerely hope that this is over now, for instance in farming, there was a farmer in Chiredzi with a crocodile farm and another one in Triangle with a sugar cane farm. They were told to leave, so we had to help protect them. We were successful, but each case took several months before the issue was resolved. Our Bippa has mostly been about protecting German investment and what we would like to achieve now is that we will be able to promote investment.

However, that means everyone in government, in any ministry, in any authority understands that a foreign investor is someone who is here to help the Zimbabwean economy by providing jobs. This is why foreign investors should be treated well.

WZ: Zimbabwe is now under a new government since the military intervention last year. Does Germany recognise the new government and what is the nature of relations between the two countries?

TH: The German government, our Chancellor Angela Merkel and our President Frank-Walter Steinmeier sent congratulatory messages to President Mnangagwa. They expressed their interest to improve and intensify cooperation. They also expressed the hope that after these peaceful changes in November the government would be responsive to the wishes of the Zimbabwean people to modernise the country politically as well as economically. And of course, Germany is also part of the European Union which has expressed its interest to engage with the government of Zimbabwe.

WZ: Has Germany shifted its policy towards Zimbabwe since a new government was ushered in?

TH: We have expressed our readiness to engage and that of course would have to happen on the basis of a mutual understanding on basic principles of democracy, of human rights, and of a common understanding on economic cooperation between companies and countries.

WZ: Zimbabwe is going to have elections soon, what sort of polls does Germany want to see and are they critical in defining relations between the two countries going forward?

TH: Free, fair and credible elections are first and foremost important for the people of Zimbabwe and then for the international community, for the EU and for Germany. The EU is very happy that the government of Zimbabwe is inviting European election observers. That is extremely positive and we really believe that that is an important step. I want to underline that it may look like the election observer mission is done because the EU wants it. That is partly true but the full truth is that an election observer mission is in the interest of Zimbabwe. To have observers who confirm that everything was done properly will give more legitimacy to the process of elections and to the actual election outcome.

WZ: There has been a lot of debate on how President Mnangagwa is fighting corruption, but there are also concerns that it is targeted against his opponents. What is your view?

TH: I think the president was quoted in the newspapers saying that in the fight against corruption “I do not know friend or foe”. That should be the guiding principle. The fight against corruption should not be used as a tool against political enemies. Corruption negatively affects the morale of the population. People want to believe in their leaders, they want to trust them and if there is corruption going on they lose that fast.

German companies, and not only German companies, have very strict compliance rules and I have met a lot of German businesspeople who say we can’t do that. The fight against corruption must be a task for everyone. It’s not just a task for government, but for civil society and the business community. There has to be an educative drive that people understand what their rights and responsibilities are.

WZ: There is concern about what appears to be the militarisation of government, what is your view on that?

TH: In my country, we have not had many representatives of the armed forces that played a political role. We have a clear understanding that our armed forces are under civilian control. That is very important to us, because of our past. We, of course, have a different tradition from Zimbabwe because of the liberation war. I think we have to wait and see how things develop.

This is a government that is in transition because elections are coming up. We will see how elections go and then we will see what the role of the military will be in the government after the election. That is something for Zimbabweans to decide whom they want to elect, and whom they want to have as members of parliament and to lead them.